There are countless stories of how ordinary people purchased shares in start-up businesses, then waited for a certain period and after the company in which they invested money in becomes successful, they sell their shares and become wealthy people.
Let’s take one celebrity as a perfect example. LeBron James purchased shares at Liverpool FC in 2011 for a price of $2 million. At that time, the club was at the lowest point in their history and the prices for the shares were low, which is why LeBron bought a pretty decent percentage. 7 years later, Liverpool returned to their former glory and became one of the best football clubs in the world. The $2 million investment that LeBron made is now valued at around $40 million, which is a massive spike.
Now, we understand that the average person does not have a spare $2 million and that you have to invest much smaller amounts. Many beginners are also not too familiar with this process, which is why we wanted to name a few things that should be considered when buying shares. Let’s check them out.
It would be a smart choice to choose companies that post year-to-year growth in earnings. They can provide you with valuable data which will show you how the company is progressing and you will be able to compare it with competitors, thus making the process of choosing much easier. Companies that post these reports are also a good choice as they are labeled as transparent and more open to new plans and strategies if they are the road to success.
Choose a solid platform to answer all of your questions
There are many sites that offer expert help and contain useful guidelines, which is very important, especially for beginners. These sites can help you get very familiar with the process and the more educated you are on this topic, the higher your chances of making a smart investment are.
One of the most reputable platforms of this character is https://buyshares.co.uk/. This site has numerous guides, allows you to compare the best brokers in the business, and covers pretty much every known topic on investments. It can help you get very familiar with the whole process and guide you to a good investment that can pay off massively after a certain period.
ROA and ROE
ROA is a short-term for Return on Assets. This indicator tells the investor how smart the company is using its assets, how efficient the company is in generating earnings, and overall, how capable it is in creating value for the owners. The fewer assets they use to make a profit, the better.
On the other side, The ROE is a short-term for Return on Equity. This indicator tells you how well the company uses investors’ money and how well does it manage its debt. As you may know, some companies may take up debts to run the business, so the better they are at handling it, the more stable they are, thus a better option when it comes to investing.
The Price-To-Earnings ratio, or also known as p/e ratio is a tool used to gauge the relative cost of stock in a certain company. To calculate it, you simply divide the price per share by per-share earnings. These ratios can give you a good insight into the current share price of the company you think of investing in. For example, if your selected company has a p/e ratio of 30, that means that investors are willing to pay $30 for every $1 that they earn.
What is your reason for investing?
Lastly, we wanted to close out on a more general topic. Before you even dive into the world of buying shares, you must be honest about your reason for investing. If it’s because you love a certain company and their products, then you shouldn’t do it. Love and admiration will not bring you profits, calculated and educated decisions will.
After all, you must know that this is a long-term investment and you will probably have to wait a certain period before it pays out. If your decision is not calculated, you are more prone to mistakes and mistakes often lead to failure.